NCUA Liquidates Melrose Credit Union


The NCUA liquidated Melrose Credit Union on Friday. The liquidation came after almost 19 months since Melrose was placed into conservatorship under the NCUA in February 2017. In a press release, the NCUA announced that Melrose Credit Union “was insolvent and had no prospect for restoring viable operations.”

While in conservatorship, the NCUA attempted to restore Melrose’s financial condition. Melrose’s financial problems were just too serious. It had a very high concentration of taxi medallion loans. Taxi medallions are government issued licenses that allow taxis to operate. In New York City, a taxi medallion had cost over $1 million before ride-sharing app-based services like Uber became popular. The ride-sharing services have decimated the value of taxi medallions, which have resulted in mass taxi medallion loan defaults and large losses at institutions like Melrose Credit Union.

According to the NCUA press release, “Teachers Federal Credit Union, of Hauppauge, New York, immediately assumed all of Melrose’s members and shares as well as some loans and other assets.” Note, the press release says “assumed all of Melrose’s members and shares.” Thus, it appears no uninsured shares (deposits) will be lost. If no credit union had acquired Melrose, uninsured shares would not have been covered.

Teachers Federal Credit Union (TFCU) provided more details in its own press release, which included a welcome letter to Melrose members. One important detail is what will happen to member CDs. According to the TFCU welcome letter, “the terms of your loans and Certificate Accounts will remain unchanged, and your checking and savings accounts will be offered at TFCU’s current terms and rates.” Based on this, it appears existing Melrose CDs won’t change. The rates and maturity dates should hold. Often when an institution is taken over after it fails, the new institution will lower the rates of existing CDs. The CD holders are allowed to close the CDs early without penalty, but this may be little consolation if there are no other options for rates comparable to the original CDs. This is less of an issue in a rising interest rate environment.

According to the Financial Times, Melrose is the largest retail credit union to enter liquidation. At the time of liquidation, it had approximately $1.1 billion in assets. Its size had fallen considerably in the last four years. In 2014, it had more than $2 billion in assets.

Melrose Credit Union had been popular at DA due to its easy membership requirements and competitive CD rates. I first reported on Melrose Credit Union CDs in 2006. Ever since I have been reporting on Melrose, it has operated with an open charter which allowed anyone to become a member regardless of geographical location or affiliations.

Melrose is the fifth federally-insured credit union to be liquidated in 2018. Two of the liquidated credit unions were tiny with assets under $1 million. The other two liquidated credit unions were small compared to Melrose, but they had assets over $10 million. These two include Louisville Metro Police Officers Credit Union ($20 million in assets) and First Jersey Credit Union (almost $86 million in assets).

Credit unions have been the only institutions failing in 2018. No banks have failed so far in 2018. The last bank failure was on December 15, 2017.

References to Help Keep Your Deposits Safe:

In our bank health ratings page, we have a list of the banks and credit unions with the worst Texas Ratios. The Texas Ratio is an industry standard for calculating the health of a bank, but is not the only factor to consider. Our data is based on financial data from the FDIC and NCUA. A Texas Ratio over 100% is considered at risk.

List of Bank and Credit Union Failures:

Related Pages: bank health ratings

listenandlearn   |     |   Comment #1
"It had a very high concentration of taxi medallion loans. "
Like Sterling National, Mike Cohen's favorite lender?
me1004   |     |   Comment #6
The difference is that one is credit union, which is supposed to be catering to the select group it was formed to serve and the other is a bank.

In other words, a credit union is supposed to be concentrated, and Melrose was formed to serve the taxi industry. In more recent times, it was seeking to expand that membership and was allowing anyone to join, but of course not abandoning its foundational clientele.
RJM   |     |   Comment #13
And back then, medallions were a good bet because they almost always went up in value.

When Uber came, Id imagine it made a lot of sense to just stop paying the medallion note and work for Uber and live with the 7 years of bad credit.
Nothing   |     |   Comment #25
Go to Vegas to bet and you are guaranteed to get your money if you win. Bets are not for retirement funds...even if NCUA to some/most.
RJM   |     |   Comment #26
Im sure this firm did not have a ton in taxi meds but even 5-15% can ruin a CU.
?   |     |   Comment #24
Where did you get the information that "Melrose was formed to serve the taxi industry"?
I knew LOMTO was formed for this specific purpose sometime back during the Great Depression.
But, I've never been about to find any detailed information about Melrose's original charter members.
Ann   |     |   Comment #38
Melrose's "Our History" page says "Melrose Credit Union was established in 1922 to provide financial resources for individuals and small business owners." NYC did not start issuing taxi medallions until the 1930s.
Att   |     |   Comment #2
They have been spending a lot of money advertising on radio in th NY area. Looks like they wanted a lot of money.
Att   |     |   Comment #7
wasted money
MelroseMember   |     |   Comment #3
Ken, so if I'm 3 years into a 5 year CD at Melrose you think I'll be able to close the CD early without incurring any penalty?
Demo   |     |   Comment #4
I believe it will be closed for you or transferred. Just wait until the NCUA will take care of it.
Anonymous   |     |   Comment #8
No, it sounds like it will just transferred, with all terms/rates intact. But you'll have to wait for a letter to know for sure.
dollarsncents   |     |   Comment #14
Usually the CD holders are given a choice, transferred to another CU sometimes at a lower rate or have the option to close the CD without penalties.
Free Dumb
Free Dumb   |     |   Comment #15
Melrose is not bankrupt. The acquiring company assumes all the liabilities.

Why would the acquiring company want to cancel the old CDs and issue new ones at higher rates?

Think, people.
Nothing   |     |   Comment #35
#33. Everyone cannot afford to have first hand experience...make sure you don’t use financials, audit reports, etc past experiences of others is normally a good predictor of the future! We need the facts, folks!
me1004   |     |   Comment #5
I just looked over the Teachers website. Their deposit and CD rates look pretty abysmal to me. The only one you could even call competitive now is their "hot" promo of only 2.50% APY for 22 months, but there are lots of better deals that that, in rate and shorter term to get it. DepositRates page for Teachers shows no better offers in the past year.

Has this place ever had a CD offer that would be the one to grab?

I was with Melrose. Would be happy to have and keep this membership, since there is no other way I could join this CU, but only if there were some hope of ever wanting to use it. I have yet to find that hope. If there is no hope of ever using it, its just a burden to keep it active to avoid inactivity fees.
NYCDoug   |     |   Comment #10
In June 2017, Teachers had what was at the time a top-rate short-term CD of 1.75% for 15 months.

Having invested in one -- to kick the can down the road a bit, while rates were set to rise (as they did) -- it's now time to reinvest. Ideally after the FOMC meets later this month. How disappointing that much better rates are to be found elsewhere than at TFCU . . .
NYCDoug   |     |   Comment #11
PS I was also hit with an inactivity fee from Melrose, last January. While waiting in the wings for a potential resurgence to their former glory, I lost all of ten cents interest from my otherwise dormant savings account. [They had nothing more to pull]. How petty! But that should have been another clue . . . as to how desperate they were.
RJM   |     |   Comment #12
Regarding inactivity fees. I was a member of an S&L since I was 15 and had not touched my small savings account in several years. I went to close it out because I heard they were closing at least my branch.

They told me inactivity fees had emptied my account. I complained that I was never told and they said sorry. I raised my voice and threatened to call downtown so they gave me the lousy $50. Years later, I went to open a business checking account and I was denied by Chexsystems. Because the S&L showed I left owing them money. By that time, the S&L was closed, all of them, and there was nobody to complain to.

I made an appointment with the local banks manager because they told me he could override it but that he would not do it easily. So I took a copy of my credit report showing good credit, my brokerage account showing a modest level of assets. (Probably only $10-15k at the time) and I brought $5000 in cash. And I explained what happened. He was nice enough to override it. Back then, they required an average daily balance of $2500 to avoid fees. And of course they did not pay interest.

All that to say, call & verify they did not give you a bad mark at chexsystems from continuing to charge inactivity fees.

My experience was over 30 years ago. At the time, there were very few credit unions and the ones they did would not allow anyone in the area to join like nowdays.
RJM   |     |   Comment #21
Not member, customer. member is CU speak.
NYCDoug   |     |   Comment #9
I have/had accounts in both Melrose & TFCU. The [former] Melrose branch remains closer to me, and so having easier access to TFCU is a bonus.

At present I have a mere $25.03 in my Melrose account, but substantially more at TFCU -- in a large short-term CD which, in fact, matures in two weeks. [More in this CD -- inadvisedly --than the $250k covered by NCUA.]

Glad the tables were not turned -- with TFCU going down the drain -- but my concern is now what this does to the balance sheet of the acquiring institution. How liquid, how stable (how advisable) will it be to roll over some of this month's maturing funds into a new CD at TFCU?

And there would seem to be no point in retaining my $25.03 at Melrose. [For membership, TFCU requires only $1.] Will these two institutions minimum Savings Accounts (for Membership) be merged? How soon can I get my $25 out? And how soon can I use the closer-to-me [former] Melrose branch, in Briarwood, for TFCU transactions (like my CD withdrawal later this month) . . . ?

A death in the family raises so many questions!
ucla   |     |   Comment #16
what was melrose health rating and texas ratio a few months ago?
Free Dumb
Free Dumb   |     |   Comment #20
Melrose has been in conservatorship for over a year. Anyone who paid more attention to the "health rating" than a conservatorship is making a bad decision.
ucla   |     |   Comment #22
when did this site first inform about conservatorship?
scubabelle   |     |   Comment #27
ucla - Have you been living under a rock?! I'm teasing but - seriously - this has been a much published and discussed event for 1 1/2 years :} Yes it was on the DA website. Yes it was on the Melrose CU website. All you had to do was google "Melrose CU" and it would come up. This is a good reminder for all of us (I'm speaking to myself too) that we ought to continually monitor the health of all of our financial institutions.
RJM   |     |   Comment #23
And yet, nobody has or will lose money or access even if they ignored the conservatorship news. If that was even possible. I can't imagine all members did not get an email or that its website did not mention it.

Might want to stick to selling underground bunkers with your fear mongering.

My backyard is already full of junk silver coins. LOL
Melrose conservatorship blog post 021017
Melrose conservatorship blog post 021017   |     |   Comment #29
UCLA (#22), a quick search of DA using "melrose conservatorship" brought up the following blog post dated 2/10/17
The other Ken
The other Ken   |     |   Comment #30
Will membership continue for Melrose depositors who live in states outside the TFCU membership area?
Anon1234   |     |   Comment #36
#30 read through the comments in this forum thread:
hank   |     |   Comment #32
The ncua press release talks about member accounts being insured to 250k and separate insurance for iras and for joint accounts. It doesn't mention pods. I have a pod account account there. I presume it is covered.
Anonymous   |     |   Comment #37
Yes, of course your pod is covered. The NCUA insurance is unchanged; they are just emphasizing it to calm depositors' nerves.
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